SEZ rules leave room for real estate players

The special economic zones rules restrict a promoter/developer to transfering acquired land only to other approval holders. While this will curb speculative land deals, it also implies that promoters who are not able to develop their acquired land can transfer it by way of sub-lease or any other mode to other persons holding a valid letter of approval.

Another clause stipulates that developers of Special Economic Zone cannot sell land from the zones for which they hold letters of approval.

However, the rules have solved a major demand of the industry in allowing promoters to acquire pieces of land that may have other right holders within them. Such areas - like highways, railway lines - will be bonded off for customs purposes.

The SEZ rules also make it clear that the letter of approvals given to developers shall be valid for a period of three years within which time they have to take "effective steps" to implement the proposal. However, on request, the Board of Approval can extend the period of request for two more years.

Proposals for SEZs are to be sent to the state governments who would then send it to the SEZ Approval Board in the commerce ministry. The Board has the right to modify proposals subject to requirements of minimum area of land and other terms and conditions.

The Rules also makes a distinction between processing (manufacturing) and non-processing Areas in SEZs . Developers can allot land in the non-processing areas for business, social and recreation facilities.

Significantly, the rules also says that if a developer or co-developer proposes to develop residential or business facilities in SEZs through a Special Opurpose Vehicle then they should hold at least 26 per cent of equity in the entity.

Industry body PHDCCI welcomed the special economic zones rules but expressed concern that labour policy has not been made flexible in these zones.

"For creating a conducive work culture in export units, the management should have some discretion as this would lead to higher productivity," it said.

The chamber also said the simplification of procedures and single-window clearance mechanism for both developers and for setting up units was a good move.